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The other likely driver of increased MBA app volumes

April 20, 2016 by EssaySnark Leave a Comment

While that substitution effect that we described recently, with people swapping out the MBA for the JD in building their future careers, is likely a factor, it does not explain why app volumes would be increasing so markedly, or why app QUALITY has been going up with so many stronger profiles trying for the MBA in the past few years. More people switching from law school to bschool would not likely result in GMAT scores going up as they have. So what else is behind it?

Well, when you live in America, where the economy is chugging along and is actually doing reasonably okay, it’s easy to forget that that’s not the case elsewhere in the world. With the new economic reality of negative interest rates in Japan and Europe and the European Central Bank implementing their own program for quantitative easing , it should be clear that other countries are having trouble. The U.S. Fed ended its QE program in 2014 and implemented its first interest rate hike since the Great Recession in Q3 2015. It’s unlikely that Janet Yellen will be raising rates again in the next few months but we do think it will happen sometime in 2016. The Fed only raises rates when the economy is growing. We don’t know of any other economies in the world where they’re even having that discussion. When you live here – unless you’re in the tech sector – it may not seem like America is doing all that great, since there are still many many people who have been unemployed for a really long time. But compared to the rest of the world, things are pretty good here (especially, at least for now, in the tech sector).

So while we have no direct knowledge of this since the adcoms don’t tend to publicly share these data (Ross sometimes does but most don’t), we’re betting that a good chunk of the increased MBA app volumes is international. We certainly don’t see any tapering off of Indians and Chinese and Singaporeans and Koreans interested in American bschools. There’s also plenty of Europeans and South/Central Americans, too, though those traditionally have made up fewer slices of the applicant pie. [Post-publication update: We just saw a report that overall across all American university, there’s been an increase in international students in the U.S. and that one-fifth of those students are studying business (data includes undergrads too). Despite what you might expect given the stereotype of the international student, only 12% are focusing on the sciences. Reasons cited are that other economies are now strong enough that families can afford to send their children overseas (which does not contradict what we said above about U.S economic strength). source ]

And of course there’s that tech sector. We’re not certain of which is the cause and which is the effect, but certainly there are lots and lots of BSers who say they want to go to work for Facebook and Google and Amazon and Uber after they complete their degree. It’s more probable that these people are interested in the MBA first, and then decide on the tech sector thing second (that typically is how it worked when everyone was saying they wanted to go into finance after bschool, a decade ago) but who knows. There is a massive aura of sexiness where tech companies are concerned, and Silicon Valley has become the seat of power, pulling talent and money and many many dreamers away from the original base of Wall Street. It’s hard to resist the siren call of wanting to go to bschool and then trying to land at one of those places. This is true for plenty of Americans and, it seems, even greater numbers of Indian applicants especially. A quick review of our client roster for the current season shows the vast majority of BSers saying they want to go into consulting (that’s been the standout trend for several seasons now) and then the next-popular goal being product management at a tech firm. In fact, about the same number of BSers we worked with this past year were saying prodmgmt as said all forms of finance (investment management, IB, PE, etc.). These are not minority numbers.

So you get all these people around the world whose countries are not doing so great, and you get the allure associated with working for a high-prestige brand-name company like Facebook or Google, and the Mark Zuckerberg Effect where it seems so simple that anybody can create fabulous success and wealth for themselves in tech, and it’s an obvious equation for increased interest in the American MBA to get there.

The thing with trends is that they don’t last forever. At some point this will give way, too. Hopefully the business schools won’t see a crash the way law schools have – though the “bubble” in management education has been predicted over and over again for decades. Hopefully the economies of countries around the world will improve and opportunities will expand such that people of MBA age won’t feel like they’re in a dead end with their jobs and careers. For now, things are going to remain competitive when you’re trying for a big jump that a lot of other people are also trying for. A strong profile will always make it in to a good MBA program – but it may take longer than expected, or happen in a different way than originally envisioned, and the definition of “strong” may be narrowing before it becomes broad again.

Filed Under: consulting, general snark, technology Tagged With: trends

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